In the mid-stage trial, Gilead's GS-7977, acquired with its $11 billion purchase of Pharmasset, was combined with Bristol's daclatasvir and received very strong response rates from previously untreated patients.

The results were accomplished without using interferon, an injected drug that causes flu-like symptoms and other side effects that often lead hepatitis C patients to discontinue or delay treatment.

"This reinforces that '7977 is the best asset in the Hep C space and restores 'world order' with Gilead ... as the one to beat," Thomas Russo, analyst at Robert W. Baird, said in a research note.

Bristol shares rose 3.3 percent in early trading.

Bristol's daclatasvir is from a new class of drugs known as NS5A inhibitors. GS-7977 is a closely watched hepatitis C drug known as a nucleotide polymerase inhibitor.

All 44 of the patients in the study who had the most common and difficult to treat Genotype 1 version of the disease had undetectable levels of the virus in their blood four weeks after completing treatment, for a 100 percent response rate.

Forty of 44 patients with Genotypes 2 or 3 of the virus had undetectable levels at four weeks following treatment for a 91 percent response rate.

Any patient who still has undetectable levels of the virus 12 weeks after completing treatment, known as a sustained viral response, or SVR12, is considered cured of the serious liver disease.

Separately, Gilead reported results from the ELECTRON study, showing that of 25 patients with genotype 1 hepatitis who completed 12 weeks of treatment with GS-7977 and the older antiviral ribavirin (RBV), 88 percent still had undetectable levels of virus four weeks after completion of treatment.

Mark Schoenebaum, an analyst at ISI Group, said the ELECTRON data was better than expected, since most analysts had expected a result around 50 percent.

"Overall, we'd characterize the phase 2 data as very robust, with SVR rates well above expectations," J.P. Morgan analyst Geoff Meacham said in a research note.

DEVELOPMENT RACE

Hepatitis C is currently one of the hottest areas of medical research, with several companies pursuing treatment regimens that would eliminate the need for interferon. Even the newest hepatitis C drugs approved last year that dramatically improved cure rates must be taken with interferon and ribavirin.

Patients in the various arms of the Bristol-Gilead study were treated for 24 weeks. The interim data looked at the response rates four weeks after they completed the therapy, which is considered to be a fairly accurate predictor of the likely final results.

In one arm of the study, the Gilead drug was given alone for the first week as a lead in therapy. Another arm added the older antiviral drug, ribavirin, which is currently part of all hepatitis C treatment regimens.

Researchers found that using GS-7977 as a lead in drug did not impact response rates and that the addition of ribavirin made no difference other than to add side effects, such as anemia, that were not seen in the non-ribavirin arms of the study, Bristol-Myers said.

One patient in the Genotype 2/3 arm experienced viral breakthrough during treatment and one suffered a relapse. Two patients dropped out for medical reasons believed to be unrelated to the study drugs, according to the data presented on Thursday at a major European liver disease meeting in Barcelona.

The experimental drugs were considered to be well tolerated with the most frequent side effects being fatigue, headache and nausea, Bristol said.

Gilead is commencing a trial of 7977 in combination with its own experimental NS5A inhibitor, while Bristol-Myers is also testing daclatasvir in combination with a drug similar to 7977 that it acquired with its $2.5 billion purchase of Inhibitex, as well as with other experimental drugs in its development pipeline.